Correlation Between Dow Jones and FlexShares Core
Can any of the company-specific risk be diversified away by investing in both Dow Jones and FlexShares Core at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dow Jones and FlexShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and FlexShares Core Select, you can compare the effects of market volatilities on Dow Jones and FlexShares Core and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dow Jones with a short position of FlexShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and FlexShares Core.
Diversification Opportunities for Dow Jones and FlexShares Core
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and FlexShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and FlexShares Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Core Select and Dow Jones is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dow Jones Industrial are associated (or correlated) with FlexShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Core Select has no effect on the direction of Dow Jones i.e., Dow Jones and FlexShares Core go up and down completely randomly.
Pair Corralation between Dow Jones and FlexShares Core
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.74 times more return on investment than FlexShares Core. However, Dow Jones is 1.74 times more volatile than FlexShares Core Select. It trades about 0.08 of its potential returns per unit of risk. FlexShares Core Select is currently generating about 0.03 per unit of risk. If you would invest 3,400,504 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 1,090,561 from holding Dow Jones Industrial or generate 32.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. FlexShares Core Select
Performance |
| Timeline |
Dow Jones and FlexShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
FlexShares Core Select
Pair trading matchups for FlexShares Core
Pair Trading with Dow Jones and FlexShares Core
The main advantage of trading using opposite Dow Jones and FlexShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, FlexShares Core can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FlexShares Core will offset losses from the drop in FlexShares Core's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| FlexShares Core vs. Schwab International Equity | FlexShares Core vs. Schwab Emerging Markets | FlexShares Core vs. Schwab Short Term Treasury | FlexShares Core vs. Schwab TIPS ETF |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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